A Quick look At Three Material Stocks – BLD, JHX, FBU

Due to the fall in the housing prices and overall housing market slump, many building and material companies faced lot of challenges during last year. The below-mentioned material stocks are expecting things to improve in the near future. Let’s take a closer look at the performances of these stock

Boral Limited (ASX: BLD)

Australia’s leading construction materials and building supplier Boral Limited (ASX: BLD) has entered into an agreement with a Western Australian consortium to sell its Midland Brick business, in line with its strategy of focusing on construction materials in Australia and reducing exposure to bricks globally.

Under the term of the agreement, the company expects to receive proceeds of around $86 million, which will be used to reduce debt and fund strategic growth opportunities.

The company is committed to investing in its leading integrated construction materials business, where it supplies materials to residential, commercial and infrastructure building and construction markets across all states and territories

The new owners of Midland Brick business are planning to further strengthen the Midland Brick’s position, as a locally-owned, sustainable business with a proud record of serving the WA building industry for more than 70 years.

In the first half of FY19, the company earned EBITDA of $485 million and NPAT of 200, down by 3% and 6% respectively on pcp.

FY19 Results Snapshot (Source: Company Reports)

It is expected that the company’s FY19 EBITDA will be higher than FY18 for continuing operations with a skew to the second half, underpinned by:

  • EBITDA from Boral Australia excluding Property to be similar to the prior year, and Property earnings of around $30 million, which will all be in the second half
  • Slightly lower profits from USG Boral;
  • FY2019 EBITDA growth from Boral North America, of approximately 15% in US dollars, excluding discontinued operations;

Stock Performance: BLD’s stock has provided a return of 0.40% in the last six months as on 22 August 2019. The stock is trading at a PE multiple of 11.580x with an annual dividend yield of 5.42%. Its 52 weeks high price is $7.420 and its 52 weeks low price is $4.400 with an average volume of 5,365,563. At market close on 23 August 2019, the stock was trading at a price of $4.960, down by 0.402 intraday,  with a market capitalisation of circa $5.84 billion.  It is to be noted that the BLD’s shares are trading close to its 52 weeks low price.

James Hardie Industries Plc (ASX: JHX)

James Hardie Industries Plc (ASX: JHX) earned net sales of around $656.8 million in the Q1 FY2020, up 1% on the previous corresponding period.

In Q1 FY19, the company witnessed an uplift of 16% in its adjusted EBIT and increase of 13% in its Adjusted NOPAT, as compared to pcp.

The company’s North America Fiber Cement segment witnessed a very good volume growth in a down market while its exteriors business grew by 5% in volume in the quarter, compared to the prior corresponding period (pcp).

During the quarter, the company’s Asia Pacific Fiber Cement segment delivered solid financial results while its Europe Building Products segment delivered strong revenue growth in Euros of 7%.

Q1 FY2020 Results Snapshot (Source: Company Reports)

The company’s commercial transformation and implementation of lean manufacturing in its North American plants progressed well during the period.

In FY2020 the company expects:

  • Modest growth in the US housing market in FY 2020;
  • North America Fiber Cement segment EBIT margin to be at the top of its range of 20% to 25% for FY2020;
  • Improvement in operating performance of plants with improved net average sales price and mix, flattening of input costs and modest underlying housing growth;
  • Net sales from its Australian business to continue to grow above the market;
  • Europe Building Product segment to achieve year on year net sales and EBIT margin growth;

Stock Performance: JHX’s stock has provided a return of 28.84% in the last six months as on 21 August 2019. The stock is trading at a PE multiple of 31.320x with an annual dividend yield of 1.78%. Its 52 weeks high price is $23.410 and its 52 weeks low price is $14.380 with an average volume of 1,720,134. AT market close on 23 August 2019, the stock was trading at a price of $23.060 with a market capitalisation of circa $10.27 billion. It is to be noted that JHX’s shares are trading close to its 52 weeks high price.

Fletcher Building Limited (ASX: FBU)

Leading manufacturer of building products, Fletcher Building Limited (ASX: FBU) has recently unveiled its annual FY19 results. Despite facing challenges in Australia, the company was able to return back to profitability with net earnings attributable to shareholders of $164 million compared to a loss of $190 million in the prior year.

FY19 Results Snapshot (Source: Company Reports)

For FY19, the company reported revenue from continuing operations of $8,308 million, up 1% on FY18.

During the year, the company’s core New Zealand divisions, including residential, delivered good results, and maintained strong market positions.

One of the major highlights for FY19 was the successful sale of the Formica and Roof Tile Group businesses,  which were completed ahead of schedule and the proceeds received were above expectations.

The company is committed to defend and grow its NZ building materials and distribution businesses and leverage its position in residential. The company has maintained its competitive positions and market shares throughout the year; however, margins have either held flat or seen some compression across most businesses. The company believes that it is well set up to focus on improving operational disciplines through FY20 and setting itself up for margin improvements and growth in FY21.

The Construction division of the company changed significantly during the year with a strengthened management team and experienced project teams that are fit for purpose. During the year, the company made significant progress on closing out the historical B+I projects with six remaining to be completed and are within the provisions made in February 2018. As part of the overall positioning of the division, the company intend to recommence focused bidding in the New Zealand vertical construction market.

The company’s total available funding as at 30 June 2019 was $2,257 million. The Group’s gearing at 30 June 2019 was 7.2%, significantly lower if compared with 23.5% at 30 June 2018. The Group’s leverage ratio (net debt/EBITDA) at 30 June 2019 was 0.4 times compared with 4.8 times at 30 June 2018.

FY2020 Outlook- In New Zealand region, the activity in the residential sector is expected to decrease slightly in FY2020 compared to FY19. This is due to the easing in the level of new residential consents but continued strength in the Auckland region. In Australia, the residential activity is expected to continue to contract, however, the market environment remains uncertain.

Stock Performance: FBU’s stock has provided a negative return of 8.37% in the last six months as on 21 August 2019. The stock is trading at a PE multiple of 23.830x with an annual dividend yield of 4.24%. Its 52 weeks high price is $6.350 and its 52 weeks low price is $4.200 with an average volume of 970,706. At market close on 23 August 2019, the stock was trading at a price of $4.390, up 0.228% intraday, with a market capitalisation of circa $3.74 billion. It is to be noted that FBU’s shares are trading close to its 52 weeks low price.


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